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Engaging an agent
24/04/2007 The Star Articles of Law by BHAG SINGH
Before signing any agreement, ensure the document specifies the extent of an
agent’s representation.
WHEN appointing a real estate agent to sell property, it is necessary to be
clear as to the extent of authority conferred. Is it merely to locate a
potential purchaser or is there a firm commitment as to the basis of the
intended sale? The actual wording will determine the true relationship
thereby created.
A difference exists between a situation where what is to be sold is already
in a deliverable state and one which necessitates the provision of goods or
services before the transaction can go through.
In the former, it may be possible to compel the seller to transfer the land
or deliver the goods. In the latter, it may be not be possible. So the
remedy for the aggrieved party may lie only in damages.
There are occasions when a person with an intention to sell his property
signs documents without realising what the consequences are. A person
signing such documents provided by an estate agent may think that he is only
asking the agent to look for a buyer for him.
A few days later, the estate agent may turn up to tell him that he has
already found a buyer and that he is now obliged to sell his property to the
buyer at the price which has been indicated.
The seller may have since changed his mind, possibly because he decided not
to part with the property or he may have found a buyer who is willing to pay
more. Can he now back out from the sale? Such is a situation faced by our
reader.
Does the document in the estate agent’s hand constitute a binding
arrangement? If it does, then the seller is bound to sell. If he fails or
refuses to do so, then he is in breach.
Whether a person is bound depends on the nature of the document that has
been signed and what its contents are, and what happened before and after
the documents were signed.
Speaking about such surrounding circumstance in the Privy Council in Daiman
Development Sdn Bhd v Mathew Lui Chin Teck & Anor, Sir Garfield Barwick
said:
“The question whether parties have entered into contractual relationships
with each other essentially depends upon the proper understanding of the
expressions they have employed in communicating with each other, considered
against the background of the circumstances in which they have been
negotiating, including in those circumstances the provisions of any
applicable law.”
The Court will seek to ascertain the intentions of the parties. If those
words are clear and admit only one sensible meaning, then that is the
meaning to be ascribed to them – and that meaning is taken to represent what
the parties intended. However, if this is not so, then the position would
be, as said by Saville J. in Vitol B.V. v Compagnie Européenne des Pétroles:
“If the words are not so clear and admit of more than one sensible meaning,
then the ambiguity may be resolved by looking at the aim and genesis of the
agreement, choosing the meaning which seems to make the most sense in the
context of the contract and its surrounding circumstances ... but if, having
attempted this exercise, it may simply remain impossible to give the words
any sensible meaning at all, in which case they (or some of them) are either
ignored, that is to say, treated as not forming part of the contract at all,
or treated as demonstrating that the parties never made an agreement at all,
that is to say, had never truly agreed upon the vital terms of their
bargain.”
There will be no binding arrangement and, therefore, no valid contract, if
the documents or letters relied on as constituting a contract contemplate
the execution of a further contract between the parties.
In such a case, it is a question of construction – whether the execution of
the further contract is a condition of the bargain or whether it is a mere
expression of the desire of the parties as to the manner in which the
transaction already agreed to, will go through.
In the former case, there is no enforceable contract because the condition
is unfulfilled or the law does not recognise a contract to enter into a
contract. In the latter, there is a binding contract and reference to the
more formal document may be ignored.
However, there would be no binding arrangement if the parties make it clear
that they are not to be bound. In Branca v. Cobarro, the agreement entered
into by the parties contained a clause as follows:
“This is a provisional agreement until a fully legalised agreement, drawn up
by a solicitor and embodying all the conditions herewith stated, is signed.”
In this case, it was decided by the Court that a binding agreement had come
into effect, and that the parties were bound. If any party does not wish to
be bound until a formal contact is signed, the preceding correspondence
should make it clear.
It is therefore necessary to carefully evaluate the document that is being
prepared by the estate agent.
When signing such a document, one should be careful to be conscious whether
one is authorising the estate agent to merely locate an interested buyer or
negotiate, or spelling out the specific terms upon which you – the seller –
want to sell and the estate agent is to find a buyer on those terms. |
